Why the Electro Optic Systems (ASX:EOS) share price is higher today

Freshly award contracts have investors excited…

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green arrow representing a rise in the share price

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The Electro Optic Systems Hldg Ltd (ASX: EOS) share price is showing a shade of green on Friday.

This follows the communications, defence, and space company providing a market update concerning awarded contracts.

In afternoon trade, the EOS share price is 4.18% higher to $3.21. Despite the jump, shares in the company are still roughly 28% lower since the start of the year.

20 million reasons why shares are higher today

According to the release, the company has secured $20 million worth of contracts with the Australian Defence Force (ADF) over the last month.

These awarded contracts specifically cover advanced technology research and development activities in electro-optic sensors, EM Solutions Cobra terminals and sustainment.

The EM Solutions Cobra terminals contracts involve the next three shipsets of the Royal Australian Navy’s SEA1180 program for Offshore Patrol Vessels. This is in addition to the SEA1445 program for Enhanced Cape Class Patrol Boats.

Meanwhile, the sustainment portion entails the company supporting the existing Cobra terminal population for the next 12 months. These are in service and used by the Royal Australian Navy.

Notably, the contracts are not expected to have a major impact on the company’s 2021 revenue and profit guidance. However, they are significant for underpinning revenues in 2022.

Another positive for the EOS share price, the contracts were said to be important for prospective growth projects beyond 2022.  

Commenting on the win, EOS Group Chief Executive Officer, Dr Ben Greene said:

We are delighted to be extending our relationship with the ADF across a range of activities within EOS. The Commonwealth of Australia recognises the ability of sovereign industry in Australia to deliver vital capability for the ADF and we look forward to further collaboration in the future.

The company is expected to deliver on the contracts over the following 24 months.

EOS share price performance

It has been a rough year for the EOS share price. Investors are nursing 29% losses on their EOS holdings following a shift in sentiment. COVID-19 induced supply chain disruptions have weighed on the company’s shares. However, EOS has since reported those issues are resolved.

Yet, EOS shares continue to be one of the most shorted on the ASX. As covered by my colleague, James Mickleboro, EOS has 8.1% of its shares held short. This can put downward pressure on the EOS share price.

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Motley Fool contributor Mitchell Lawler owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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